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INVENTORY MANAGEMENT

Policies based on ABC analysis might include investing

 extra care in forecasting for C items.
 more in supplier development for A items.
 more in inventory security for C items.
 the most time and effort verifying the accuracy of records for B items.

Reorder point models are primarily used for independent demand items.

 True
 False

If the production rate in an economic production lot size model is very much larger than the consumption rate, the results are practically the same for economic production lot size and EOQ.

 False
 True

Which one of the following statements concerning the economic order quantity (EOQ) model is TRUE?

 Quantity discounts can occur and taken into account in the total cost calculations.
 Uncertainty in leadtime may not exist.
 Annual holding cost, annual purchasing cost and annual delivery costs are the relevant costs in the
 Partial receipts are allowed.

One use of inventory is

 to ensure that item cost is maximized.
 to provide a hedge against inflation.
 to tightly link production and distribution processes.
 to tightly link a firm s production with its customer s demand.

Fixed-order quantity models are:

 Fixed for a specified time period
 Made up of a variable order size
 Event triggered
 Time triggered

Which one of the following statements is best?

 A fixed interval system lends itself more to quantity discounts than does a ROP system.
 A fixed interval system requires more administrative control and computer support than does a ROP sy
 In a fixed interval system, the value of Q is kept the same from one cycle to another.
 A fixed interval system requires more safety stock than a ROP system.

In the basic fixed-order quantity model, if annual demand doubles, the effect on the Optimal Order Quantity (EOQ) is:

 it is about 70% of its previous amount
 it increases by about 40%
 it is half its previous amount
 decreases by a factor of 2
 it doubles

The difference(s) between the basic EOQ model and the production order quantity model is (are) that

 the production order quantity model does not require the assumption of known, constant demand.
 A. the EOQ model does not require the assumption of known, constant lead time.
 there are no holding costs in the production order quantity model.
 the production order quantity model does not require the assumption of instantaneous delivery.

Most inventory models are made based on:

 Minimizing lead time
 Optimum influence on demand
 Cost minimization
 Profit maximization
 Minimizing setup times

Inventory record accuracy would be decreased by

 cycle counting.
 ABC analysis.
 increasing stockroom accessibility.
 reorder points.

Which of the following is NOT a type of inventory?

 MRP
 work-in-process
 finished goods
 raw material

Space considerations are not included in any of the economic ordering models.

 False
 True

The two most important inventory-based questions answered by the typical inventory model are

 when to place an order and how many of an item to order.
 how many of an item to order and with whom the order should be placed.
 how many of an item to order and what is the cost of this order.
 when to place an order and what is the cost of the order.

With the quantity-discount model, an order level might not be at a minimum point of a total cost curve.

 False
 True

The goal of ABC analysis is to

 to identify the A items for better inventory control.
 estimate dollar value per pound.
 determine the profitability of items.
 estimate average volume per dollar value.

A firm producing medical equipment to customer specifications is most likely using a

 make-to-stock strategy.
 mass production strategy.
 assemble-to-order strategy.
 make-to-order strategy.

What items do students typically buy on an ROP basis?

 bran muffins
 wedding gifts
 computer software
 textbooks
 gasoline for car

In a two-bin inventory system, the amount contained in the second bin is equal to the:

 optimum stocking level
 safety stock
 ROP
 amount in the first bin
 EOQ

Monitoring the temperature of tomatoes during shipment would best be done using:

 RFID tags
 GPS
 Bar codes.
 ROP
 Universal Product Codes (UPC)

In the basic Q model, if the lead time doubles, the EOQ will:

 increase, but not double
 decrease by half
 remain the same
 double
 none of the above

For a company that manufactures most of its products as standards, more inventory should be placed

 within the plant as work-in-process.
 equally distributed between the plants and warehouses.
 closer to the customer.
 close to suppliers.

Extra units that are held in inventory to reduce stockouts are called

 reorder point.
 safety stock.
 demand variance.
 just-in-time inventory.

Which of the following inventory systems would be most appropriate in controlling many items ordered from the same vendor?

 Fixed Time Period System
 Materials Requirements Planning System
 Fixed Order Quantity System
 One Period Inventory Model Using Marginal Analysis

The Basic EOQ model ignores:

 B and C items
 Holding costs
 Purchasing costs
 Ordering costs
 A items

ABC analysis divides an organizations on-hand inventory into three classes based upon

 annual dollar volume.
 unit price.
 the number of units on hand.
 annual demand.

If both the lead time and daily demand are constant (no variation), the ROP is equal to:

 Safety stock
 Expected demand minus safety stock.
 Daily demand times lead time.
 Expected demand plus safety stock.

A system that triggers ordering on a uniform time basis is called a

 fixed-period system.
 EOQ.
 reorder point system.
 fixed-quantity system.